Values and NPV: Time to Join the Dots

September 29, 2011

CSR, plainly, will never be the same again. In fact we could be wonderfully out of business.

No Pollyanna here, but some things do at least become clearer. The seismic shock waves generated by the politics of the debt ceiling have yet to run their course – both here at home and around the planet – in the markets of politics as well as those of finance. Smart people have taken various views of the brinkmanship that scared the world but also ended up reassuring it — and the budget slashing pas-de-deux to which in classic DC fashion our pols have now committed themselves.

But the core issue is one of accountability over time, and it lies at the heart of the dilemma of 21stcentury democracy – and business. Accountability over time. Democracies think in the short term. Electoral cycles cycle, and we are stuck with one in which the two-yearly House cycle basically requires continual electioneering in parallel with the process of legislative government.

I don’t doubt the healthy side of such hyper-accountability. But we need to see the downside. Especially in light of the Exponential Principle – that change takes place faster all the time. Side by side, the same problem is there in business. The pressure of the bottom line – next quarter.

Corporate execs are not prepped to think Good to Great. They know that average stockholding today is around 18 months, down from 7 years (7 years!) a generation ago (and quite apart from the day-traders at one end of the spectrum). Point is, hyper-accountability in politics and business turns out in the end of the day to be no accountability at all. Because the accounts, as it were, are long-term.

There are really two core issues. One is about time. Hang around and see what becomes of the company, as societies and markets and products change. The other is, as it were, about space. That is my metaphor for externalities. Those economic elements that are not included in the corporate calculation.

Environmental impact is plainly one (please, conservative readers, hold on). Decommissioning costs – indeed, proper life-cycle costing – is another. Subsidies (ethanol; ouch) and special taxes (gasoline) are others. Point is: I’m a purest on NPV and externalities. Which does not mean to say I oppose all efforts to enable the poor to benefit from goods they could not afford (public education, for example, would be a good idea, as is public transportation), or all efforts to encourage initiatives that smart people think will help this nation (please don’t use the Euro term “industrial policy;” let’s just say, America first).

But the baseline simply has to be economic. The left tends to push for uneconomic employee-friendly solutions (like the minimum wage, which drives economists apoplectic – why not use tax credits?); the right for endless tax breaks for corporate actors (I’ve no problem with zero corporation taxes; just make it equitable and make everyone pay – payroll works just as well as long as the de facto payroll at the top end – options and the rest – get caught by the net).

But as we have been learning, NPV is driven by much more than what a pound of tomatoes or a yard of silk or an iPad will fetch in the market. Who picks the fruit? Harvests the silk? Puts the iPad legos together? And what’s the global impact if you cultivate a gazillion hectares of tomatoes, anyway? Should we use synthetic biology to make the silkworms more productive? Foxconn, the uber-device-manufacturer in China, are bringing in 100 million new robots.

As we know, there have been three stages of CSR. The old “corporate philanthropy,” giveaways by nice guys (or at least nice when they chose to be!) like Hershey and Carnegie and Rowntree (and, ahem, Gates and Buffet who fit perfectly into the 19th century model).

Then, secondly, the emergence of “corporate social responsibility.” I do think it is a terrible phrase (sorry, if its proud coiner is reading along here) – partly as it proposes a focus external to the corporate for corporate interests (“hey guys, be responsible!”), and thereby brings us back into the world of heavy capitalists who went on to discover conscience.

Key point about #3, which we shall call the post-CSR, is that it lies at the heart of business strategy. Intrinsic. Aligned. It assumes a world in which values and brands are in ever-closer correlation; in which (gasp) key brand managers are main-board member tasked with aligning the product with the emerging values of the changing community, which alone will shape regulatory alignment – and a market.

As we know, this is as much about the evolution of brands as it is about philanthropy and alignment. It’s also about digital/social media enabling data flow and opinion sharing.

So back to value. The faster things change, the more central will values be to corporate competitive advantage -which shape regimes and create markets. Value and values move into alignment.